Wednesday, October 17, 2012

Learn From a Fool - Believing that I Can Find a Ten Bagger

I wrote two posts recently about my investment mistakes and some mistakes that I nearly made.  I guess that as one grows older and has a longer time spent in investing, one will certainly make some mistakes here and there.

The next mistake I will like to highlight it a mistake that can perhaps only be described as ..... sheer craziness.

There is perhaps this unspoken dream amongst investors to find that ten bagger stock - the stock investment that will return your investment capital by ten-fold.  That is an alluring argument since most investors start off with a small capital base and to multiply your returns with a 5 to 10% returns seems almost meaningless.  After all, a 10% return on a $1000 investment is only $100 in profits.  Yes, we all know about the effects of compounding.  But in the Singapore stock market, most stocks don't make 10% year in and year out.  They go up 10% one month and drop 20% the next month.  So it is almost impossible to get a consistent 10% return every single year.

But most people still hang on to the dream that they might find a stock that will appreciate in value by 10 times or more.  How many stocks are actually capable of doing that in the Singapore stock market?  Some times, in the blind pursuit of such a stock, many investors throw in lots of money on a penny stock hoping that it will increase in price by ten-fold.

How possible is that?  You judge for yourself.

2 comments:

  1. Total Return = Total Dividends received + UnRealized Capital Appreciation.

    Multi-baggers based on this concept of Total Return is not impossible.

    When you believe you can't. You CAN'T!

    ReplyDelete
  2. Hi CW8888,

    Thanks for the comments. Indeed dividends allow for higher returns if they are reinvested. I was mainly referring to capital appreciation when speaking about multi-bagger stocks that people are looking at.

    ReplyDelete

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